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A wireless LAN (WLAN) is a data transmission system which uses radio transmission to transfer data between computers in a LAN'S without the use of wired network. It usually use spread spectrum or OFDM modulation technology to transfer the data between computers in LAN'S. WLAN is very simple and easy to install that's the reason it is in demand these days. In other words it's a addition to the standard wired network. The most commonly used technology by WLAN is IEEE 802.11.
In a wireless LAN two machines communicate each other using radio waves than a wire infrastructure. The equipment that contains the radio is called access point. Every machine on the network must have the NIC card to make the connection with access point. Like cellular technology the end user can roam from one access point to another access point.
Working of WLAN
There are two types of wireless network modes.
Ad- hoc mode
AD-HOC mode: It is used to build a small wireless network where two or more wireless devices can communicate each other directly without the need of any access point. This type of WLAN mode is used for small kind of networks. Because the security features are very less in AD-HOC mode compare to other WLAN modes. 
Infrastructure mode: In infrastructure mode access points are needed to communicate between the devices. Usually access point is physically connected to the wired network using Ethernet technology and act as a receiver. It works as a bridge between wired and wireless networks. It uses radio waves to transmit data between the networks.
Very powerful network security
Almost all the major operating system are supported by WLAN
Less network cost of ownership
It is totally scalable for the changing needs for time to time.
Less installation cost
There are many WLAN technologies have emerged over the time. In which these four are mostly used.
Narrowband: It uses radio frequency in the range of 50 cps 64kbps to transmit the data.
Spread Spectrum: This technology is more secure than narrowband and uses more bandwidth. Primarily used by military.
Frequency hopping spread spectrum: it synchronize the changing frequency using narrowband. Frequency hopping can take place many times in a second. Before changing the frequency again, it is constantly changing from one to another transmitting data for a certain period of time. FHSS also needs more bandwidth compare to others. It works on 26 frequencies at a time.
Direct sequence spread spectrum: It offers high data rates and shorter delays compare to FHSS, because in DSSS transmission both (transmitter and receiver) don't need to waste time on retuning.
Access points are commonly used in WLAN infrastructure mode to provide wireless access to the end user. It operates only in half-duplex mode, which means it can only receive or transmit at a time. APs usually operate in three modes:-
Root mode: - This mode is the default configuration of most of the access points. In root mode, the access point is directly connected to the wired network. The end user can easily access the wireless network through that AP.
Bridge mode: - The APs in this mode connect two different wired networks. In this mode two different wired networks can connect each other wirelessly. This is not to be used by client computers. This is a more expensive option than other modes. Mostly used for business purposes.
Repeater mode: It offers the wireless link into a network instead of a wired network which uses Ethernet port. It is used in difficult and rare situations where its use is absolute to deploy a WLAN network.
A router is used to share single internet connection within multiple machines. It is used where one or more pc's use the same internet connection at same time. Although it should be keep in mind that other things to be needed as well in wireless network. For instance a pc or laptop must have a wireless pc card to connect to the network.
PC card is an important component of wireless LAN. Every desktop or laptop must have a wireless PC card (NIC card) installed on the system before to communicate on the network. This is the interface to connect two or more PC on network.
Antenna plays an important part in wireless transmission to send and receive data. It is very important to choose an antenna according to the network's need because it impacts on the functionality of the system radically. Installation of antennas is another important factor. The rightly installation of antennas could increase signal reception dramatically. 
Multicast support: many companies around the world require support for group communication for the mobile applications like distance education and other commercial game products. Wireless multicast is the best way to update membership information as users (members) move from one location to another or leaving the group and new members joining the group. In the case, quality of service, long delay, privacy and reliability are the main challenges.
Scalability: Deploying a WLAN at great scale is another challenge. Setting up more WLAN's at a hotspot is a problematic which causes a quality of service and interference. This is very much clear by now that there should be some type of measures before setting up multiple WLAN in a particular area.
Area (location) management support: There is another way to increase or attract wireless users which is offering location based services. Wireless shipper could influence a main asset - Users can get location based billing and other services like hotel or films information nearby, if they are in the range of local access point or base station.
These carriers could deploy more sensors and access points to improve the location accuracy.
Security: Security is the main issue in WLAN environment that how the information can be secure while moving from one network to another. It's a big challenge to IT and security professionals. In addition, if WLAN is unsecure any unauthorized user can access to the network and crash the whole network. In wireless LAN the signals can leak and enter into the public or private areas that allow hackers to access the corporate data. There are many types of software available in the market that could crack the WEP encryptions. Moreover, wireless technologies like Bluetooth, cordless phones have used the same method which WLAN used to transmit their signals to end users. It can impact on quality and range of the wireless signal. 
Routing and MAC Protocols:
Routing protocols define how the routers can communicate with each others. They tell the router which route is more easy and convenient to reach the destination network. There are different protocols are used to transfer data across. Numbers of protocols are mentioned below:
Internet protocol (IP)
Novel internetwork packet exchange (IPX)
Apple exchange (AX)
(From UOB Learning material)
IEEE standard for LANs: The data link layer is divided in two sub layers as IEEE standard: LLC and MAC.
Logical link control (LLC) Layer: It is a higher layer of the sub layers. It manages the traffic like controlling errors and flow over the physical layer. The four main tasks performed by LLC are:
Defining service access points
Managing data link communication
Basically upper layers can communicate with any kind of MAC layer due to LLC For instance Token Ring IEEE 802.5 Token Passing or Ethernet - IEEE 802.3 CSMA/CD. 
Media Access Control (MAC) Layer: The MAC layer believed to be a brain of a network, which performs the tasks like transmission, carrier sensing and receiving frames.
Functions of 802.11 MAC layer: The main functions Of 802.11 MAC are Scanning, Association, Authentication, WEP, Fragmentation and Power Save Mode.
Scanning: It involves both passive and active scanning. Whenever NIC requires to find better access point signals, it always has to be passive scanning. While scanning, radio NIC get the beacons from access point and keep the record of signal strength. Beacons contain all the important information which NIC can use to choose an access point.
In active scanning, NIC need not to wait for beacons signals so it gets the quicker response from access point.
The process of checking an identity of the end user is called authentication. WLANs use two types of authentications: open system authentication and shared key authentication. The open system authentication is more important, whereas shared key authentication is used rarely. In open system authentication, a radio NIC sends a request frame to the access point and gets response back with approval or disapproval. On the other hand, a radio NIC in shared key authentication sends a request frame to AP. The access point sends response frame back to radio NIC with challenge text. A radio NIC encrypts that challenge text with its WEP key and sends it again in new request frame to access point. The access point decrypts the new request frame and matches that with the initial text, if both are same, then access point sends the frame back to radio NIC with approval or disapproval authentication.
Association is required to start synchronization between radio NIC and the access point. The association starts by sending the request frame to access point from radio NIC. The request frame contains SSID and supported data rates. The AP sends response frame back to radio NIC with association ID and other information. Once the process is complete, both radio NIC and access point are able to communicate each other.
WEP: This is another feature in which NIC can encrypt the body of a frame and on the other side receiving station can decrypt the frame upon receipt with a common key. Because it is only 40 bit key, so not very safe. The security is getting stronger by incorporating 802.1x. 
WLAN and 3G Cellular Convergences:
Wi-Fi technology has been very advanced and established in last few years. The cost of the devices has been reducing and the quality level is improving specially in WLAN and cellular. Although mobile operators are getting advantages from Wi-Fi technology but they are facing the new challenge like enabling voice over internet protocol (VoIP). This is another danger for future Wi-Fi networks and mobile operators. Which evaluate the future of WLAN in cellular networks. 
Tight Coupling: In this architecture WLAN is straight connected to the GPRS core network. In this approach, all the wireless LAN traffic travel through the cellular networks which gives the operators totally handle the WLAN network and providing the services like MMS and SMS.
Loose Coupling: By ETSI in this approach the WLAN will not be directly connected to the cellular network but it will be just an access network. However, by doing this it will result in many problems for the user authentication. The positive thing about this network would for the users who will enjoy easy roaming with third party WLAN and cellular networks. 
WLAN Application Area:
It is the next generation of e-commerce. This enables us to sell and buy things using wireless devices like PDAs and mobile phone. With the use of WAP technology, there is no need to plug in to the internet to carry on the transactions for the users. 
Telemedicine's: With the use of telecommunication medical information can be given. For instance, group of medical professionals discuss a medical case of a patient using satellite technology. They can discuss about the patient's condition (history) remotely with each other. Medical professionals use communication protocols and proficient bandwidth to make the system effortless, easy and consistent. 
GPS Based Applications: Global Positioning systems (GPS) are space based systems provide 3D positioning and time information to the users around the world. The US department of Defence operated the first GPS system to navigate the vehicles called NAVS-TAR system. GPSs are proved to be beneficial in agriculture for research purposes. There are many other GPS based applications like mobile notebooks, navigations in cars, where all the information captured wirelessly to servers.